European Bond Markets Key Terms

Learn some of the terms you'll come across when investing in European bond markets

By Jason Wood

While the basic principles of the European bond markets are similar to that of the United States, there are some things that make investing a bit different. How bond yields are calculated and the central bank that affects prices are just two examples.

Take the time to familiarize yourself with some of the terms you might come across while investing or reading about European bond markets. Here are some of those terms along with some quality resources to help get you started.

European government bonds

European government bonds are bonds that are issued by governments, sovereign entities or corporations directly associated with the government. Much like the bonds issued for investment by the United States treasury, countries in Europe issue bonds as well. In theory, these bonds are a safer investment because they are state sponsored, as opposed to privately or publicly held bonds.
Try: Visit Investing in BondsEurope.org for additional information on European Government Bonds.

Corporate bonds

Corporate bonds are issued by privately or publicly held companies that are raising capital to grow and expand their business. These bonds provide a return on investment in the form of an interest rate that is paid to the investor on a set date of maturity. When it comes to European corporate bonds, other factors such as the price of currency and tax implications must be factored into investment.
Try: Visit the European section of the Pimco investment website for a further tutorial on European bond and bond markets.

Eurobond secondary market

The Eurobond Secondary Market refers to the actual market where issued bonds are traded among investors and investing institutions.
Try: Visit Eurobonds.info for additional information about the Eurobond Secondary Market.

Basis

In terms of the European Bond Market, "basis" is used as a multiplier to calculate the interest received or paid over a given amount of time. It is important to note in this calculation that, unlike the American formula, every month is figured as 30 days.
Try: Visit Financial-edu.com for more information on calculating "basis" for Eurobonds.

European Covered Bond Council (ECBC)

The European Covered Bond Council, or ECBC, is an organization that works alongside members of every aspect of the European bond market. From issuers to analysts to investors and more, the ECBC focuses on providing greater transparency into the metrics of the market, as well as facilitating dialogue among these key players.
Try: Visit the European Covered Bond Council website for more information on the purpose and mission of the council.

Euromarket

The Euromarket refers to the market that houses all the countries of the European Union. Since many of the countries use the same currency, all tariffs for trading within the Euromarket have been absolved. The Euromarket also shares the same bank, named the European Central Bank. The European Bond Market is under the umbrella of the Euromarket and its yields and other bond metrics are affected by the European Central Bank.
Try: Investopedia provides more information on the Euromarket and all that it encompasses.